The region’s overall median sale price is suppressed somewhat by abnormally low sales of newly built homes, which typically sell for more than resale homes. Southland builders sold 1,184 new houses and condos last month, down 14.3 percent from a year earlier and the lowest new-home tally for an August in DataQuick’s records back to 1988.

But despite that, what's worrying is that price deflation still seems to be a major factor in the regional housing market. These numbers jumped out at me:

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,101 last month, down 4.6 percent from $1,154 in July and down 4.9 percent from $1,158 in August 2010. Adjusted for inflation, current payments are 52.5 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 61.1 percent below the current cycle’s peak in July 2007.

Obviously, this is great if you can get a mortgage, although it's thoroughly unclear whether this market is going to truly bottom this year, or next year, or in 2013. If you have a target mortgage payment, swell — but you need to grapple with the possibility that you have bought a declining asset and will need to wait around for a recovery curve to get you back to even. And forget about using appreciating equity to finance improvements — buyers are going to have to do that out of their own pockets.

In terms of making homeowning into a financially beneficially proposition again, Southland residents are going to have to think long-term. Very long-term. Take a look at the chart below, which I grabbed got from a Dallas Fed Economic Letter about the housing recovery. It could be another three-to-four years before we witness a sustained improving trend, after a collapse that lasted something like seven years. One thing I don't like about this chart is the Dallas Fed's assumption that the "medium- to long-run path of house prices is unaffected by the current high stock of foreclosed properties." Unfortunately, according to DataQuick, foreclosure sales amounted to more than a third — 34.6 percent — of the SoCal market in August. So here at least, I have a hard time believing that the anticipated trajectory of recovery is going to revert to the pre-2007 trend.

Previously in The Breakdown

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